Buying a Franchise: Check Your Say on the Franchisee Advisory Council

A franchise network benefits when experience from individual businesses helps shape its development. A franchisee advisory council can provide a formal channel for this. Its existence alone, however, tells you little about how much influence you will have. When choosing a franchise brand, check whom the council represents, what powers it has and whether its involvement is guaranteed by binding provisions.

1. Distinguish between advice, consultation and consent

A franchisee advisory council is a body through which franchisees can share their experience and represent their interests to the franchisor. Names such as ‘network advisory board’, ‘partner representative body’ or ‘franchisee council’ do not, however, reveal its actual powers. What matters is the framework governing it.

In particular, distinguish between three forms of participation:

• Advice: The council can make suggestions. The decision remains with the franchisor.
• Consultation: The franchisor must consult the council before making certain decisions, but does not necessarily need its consent.
• Consent: Under the agreed rules, certain measures may only be implemented with the council’s consent.

If you hear claims such as ‘Our franchisees have a say in decisions’, ask for specific examples and the relevant contractual provisions. What was the most recent decision changed following a council proposal? On which matters can the franchisor act despite a vote against the proposal?

Even a purely advisory council can be valuable. The key is to assess its role realistically and not confuse informal dialogue with a legally protected right to share in decision-making.

2. Clarify the legal status of participation rights

Germany has no specific franchise legislation and no general statutory requirement to establish a franchisee advisory council. Nor do franchisees have a general statutory right to participate in the franchisor’s business decisions. Franchisees are, in principle, legally independent business owners; a franchisee advisory council should therefore not be equated with a works council representing employees.

The franchise relationship is governed in particular by the German Civil Code (BGB) and, depending on the circumstances, the German Commercial Code (HGB), as well as German and EU competition law. Standard contract terms are subject to sections 305 to 310 of the BGB, with special rules applying to business-to-business dealings. The principle of good faith under section 242 of the BGB is no substitute for clearly agreed participation rights.

The European Code of Ethics for Franchising is a self-regulatory instrument, not statutory franchise law. Whether it creates binding obligations in a particular relationship must be assessed by examining how the parties are bound by it and how it has been incorporated into their contract. Membership of a trade association does not, in itself, establish any particular voting rights either.

You should therefore establish where the council’s rights are set out: in the franchise agreement, in a schedule incorporated into it, or merely in non-binding information. It is particularly important to check whether the franchisor can unilaterally change the council’s rules or dissolve it. Otherwise, participation arrangements that look convincing today could look very different tomorrow.

3. Examine representation and working practices

A council can only reflect a range of operational experience if its membership is suitably representative. Ask for its current rules and first establish who appoints its members. Are they elected by franchisees or appointed by the franchisor? Are businesses of different sizes, regions and stages of development represented?

Also check the following points:

• Who can stand for election and vote, and how long is a member’s term of office?
• What voting rights do franchisees with multiple locations have?
• Can all franchisees submit topics for discussion, and will they receive a response?
• How are agendas, resolutions and outcomes communicated?
• What rules apply when individual members have conflicts of interest?

Ask to speak to a current council member. Do not just ask about successes: ask about a proposal the franchisor rejected as well. What reasons were given for the rejection? Was the outcome explained to the other franchisees?

Confidentiality may be justified. However, it should not prevent franchisees from finding out either what was discussed or what the outcomes were. An anonymised summary of outcomes can provide insight without disclosing sensitive business data.

4. Secure participation rights while preserving individual rights

If having a say matters to your decision to buy a franchise, the essential arrangements should be clearly established before you sign. These include the council’s remit, the procedures to follow and the consequences of failing to involve it. A simple promise to ‘involve franchisees’ leaves many questions unanswered.

Pay particular attention to clauses stating that council decisions are binding on all franchisees. Obtain independent advice on whether, and to what extent, these clauses allow your obligations to be changed. A council’s consent does not automatically amount to your personal consent to an amendment of your franchise agreement.

Equally, the council’s work does not replace the need to pursue your own claims. Clarify whether you can still raise matters directly with the franchisor and which contractual deadlines you must observe. Ongoing council discussions do not automatically suspend those deadlines.

Practical takeaway: Do not simply check whether a franchisee advisory council exists. Examine its powers, its independence and the contractual provisions protecting its role. Meaningful participation is demonstrated by clear rules and genuine collaboration in practice.